The inventory of existing homes fell 3.5 percent from April to May, with the 3.8 million homes on the market representing 9.6 months of supply, down from 10.1 months in April, the National Association of Realtors said. Economists generally consider a six-month supply of homes a healthier balance between supply and demand.

Sales of existing homes were up 2.4 percent in May, to a seasonally adjusted rate of 4.77 million units, which helped nudge inventory in the right direction, though they were 3.6 percent below the May 2008 rate.